Republican presidential nominee Donald Trump has announced his support for lowering taxes on US citizens living overseas in a new effort to appeal to an often-overlooked group of voters. The proposal, reported by The Wall Street Journal, marks Trump's latest attempt to expand his tax policy beyond extending the 2017 tax cuts.
"I support ending the double taxation of overseas Americans," Trump said in a statement to The Wall Street Journal.
BREAKING: Trump just said that as President, he will finally END the double taxation of U.S. citizens who live abroad
Around 9 million U.S. citizens live abroad and VOTE. This is yet another game-changing policy from Trump
This man isn't going to run out of amazing policy ideas… pic.twitter.com/IPVUP6oWLP
— George (@BehizyTweets) October 9, 2024
The US has an unusual system of taxing its citizens on their total income regardless of where they live or earn it, making it unique among major countries. This policy dates back to the Civil War era income tax of the 1860s. Approximately 4.4 million US citizens lived abroad in 2022, according to the Federal Voting Assistance Program. Of these, about 2.8 million were eligible to vote in their former states.
Under the current system, an American residing in Paris would have tax obligations to both France and the US, although there are existing provisions in the US tax code to mitigate double taxation. In contrast, a French citizen living in New York typically wouldn't owe France any taxes on US income.
Trump's campaign has not provided specific details on how he would address this issue, but the proposal could potentially eliminate a frustrating burden for Americans abroad, especially those with higher incomes and investments who owe US taxes on their worldwide income in addition to local taxes.
Solomon Yue, chief executive of Republicans Overseas, an advocacy group, has been pushing for easing US tax burdens on Americans abroad for a decade. Yue said he urged Trump campaign aides to bring the subject to the former president's attention. "America first also means Americans first, regardless of where they are residing," Yue said, praising Trump's support for cutting taxes for Americans living abroad. "It's a giant first step," he added.
The Trump campaign hopes this proposal will appeal to many of those voters, particularly those living in Israel, according to a person familiar with the matter. "Fellow Americans living abroad, your vote is more important than ever," Trump said in his statement.
Current polls show a close race between Trump and Vice President Kamala Harris, who has been offering her own financial incentives, including Medicare coverage for long-term home care and tax credits for new parents and first-time home buyers. Harris has not announced any proposals to change taxes for Americans abroad.
Under existing rules, Americans living overseas don't have to pay US taxes on their first $126,500 in earned income, and there are some exclusions for housing costs. They can also get tax credits for some payments to foreign governments, but higher earners and those with investment or retirement income sometimes have to pay US taxes on top of their foreign taxes.
Marylouise Serrato, executive director of American Citizens Abroad, a nonpartisan group advocating for a move toward residence-based taxation, said the compliance costs for filing tax returns often far exceed the actual taxes owed by Americans abroad. "It makes it very difficult and complex to file, and it also limits the ability of a lot of Americans to invest and live when they're overseas," she said.
However, not everyone agrees that Americans overseas face an undue tax burden. Michael Kirsch, a Notre Dame law professor who has written on citizenship-based taxation, argues that Americans abroad are voluntarily retaining their connection to the United States. "If we were to move to a residence-based taxation system, then I think we have to think long and hard about what the consequences would be for social cohesion and what our country would look like," Kirsch said.
Advocates for Americans abroad have been working on ideas to shift the US from citizenship-based taxation to residence-based taxation. One option would be to tax Americans abroad the same way that the US taxes nonresident foreigners, who pay taxes on certain US-sourced income and dividends but don't face full, worldwide US taxation on all their income.
The challenge, Kirsch said, would be trying to prevent wealthy Americans with significant assets from establishing residences in low-tax countries. "I've got to assume that a lot of people would be on the move," he said of a pure residence-based system. For example, take Monaco, where there is no personal income tax. "For the amounts involved, I've never been to Monaco, but I've heard it's a nice place," he said.
